Megatrends and Their Impact on Retirement Planning and Living

We are living in an interesting time of seismic changes caused by megatrends –  developments that will drive future economy and massively transform our lives. These megatrends are already upon us and depending on one’s life stage and personal circumstance, the impact of these megatrends will affect each of us differently. Ripples will be felt across multiple facets of our lives. The 4 megatrends with the most impact are:

• Environmental
• Geopolitics
• Technology
• Demographics

Megatrend #1 – Environmental Change and its Far-reaching Effect

Undoubtedly, the biggest impact for me is climate change: from where I live, where I will retire to where and how I invest. Global warming is causing more frequent and severe heat waves, snow storms, hurricanes and environmental disasters. Flooding is my biggest concern. Why?

Because I call Amsterdam and Singapore home. Both are tiny cities surrounded by gazillions of water. Amsterdam is 2m below sea level at the historical city centre and 4m below at the fringe. Touching down at Schiphol Airport, I always marvel at how Dutch water management ingenuity has kept the country in existence…and flourishing for centuries!

Singapore is a tiny shiny gem sparkling in the turquoise Indian Ocean with 190km of shoreline surrounded by water, barely 15m above sea level and in a region highly susceptible to natural disasters.

And then there is Florida, where after being seduced by the climate, infinite stretches of sandy white beaches, relaxed coastal lifestyle and great R.O.I, my husband and I bought into investment property in Fort Lauderdale, 50km north of Miami and 3km from the Atlantic Ocean.

In the 11 years since, there is no question that the climate has changed drastically. I can attest to the severity and increased frequency of hurricanes during ‘hurricane season’ from mid July to end of October

The biggest scare was in 2017 when Hurricane Irma swirled forcefully from the Bahamas slamming into the Florida Keys. Sitting glued in front of the TV on real-time hurricane watch halfway around the globe in Singapore, our hearts pounded with its every twist and turn. Forecasted to land in Miami, dangerously close to Fort Lauderdale, it swerved to Naples along the east coast of Florida at The. Very. Last. Minute. Phew! What a close call. My husband commented nervously: ‘Finally, a lady with a sense of direction!”. That would have warranted a punch if I had not been so relieved myself.

Stronger and fiercer hurricanes cause more damages, driving up insurance, property taxes and Home Owners’ Association costs, directly impacting our ROI.

Personal Perspective

• Instead of a 2nd home on Penang island in Malaysia, which is home to a vibrant expat community and where we have a MM2H retirement visa, we have decided on Kuala Lumpur if and when we make that move. 
• Should our 2nd home be in Europe, it will be in a mountainous area instead of coastal. 
• Any renovation we undertake now prioritises energy efficiency despite costing more on the outset, but will reap cost-savings in the long run. 

Investment Perspective

• Our investment criteria now include flood zones and hurricane index. We have since disposed of 2 low-lying properties in Amsterdam center and re-invested in a 5th floor apartment in the eastern part of Holland, which is on higher grounds. 
• 2-third of our property holding in Fort Lauderdale have been sold, the funds directed to other asset classes.

Megatrend #2 – Geopolitics and the Balance of Power

We are witnessing a once-in-a-lifetime shift in global superpower from the western hemisphere to the east. China’s unstoppable rise is challenging United States’ leadership in economy, politics, military, technology and innovation, the last 2 long considered undisputed US strongholds. 

China’s 133 unicorns (start-ups over US$1billion) is fast gaining ground on United States’ 288, as recorded by Statista. The world’s most valuable unicorn Bytedance, valued at US$140b is from China, which owns the popular short-form video sharing platform TikTok.

The US lists 724 billionaires versus China’s not-too-distant 2nd at 626. According to Forbes, Beijing has officially overtaken NYC as the city with the most number of billionaires: 100 vs 99.

This shift in balance of power affects trade flows, business, politics, jobs, investment opportunities and wealth. China now pays higher for AI Engineers than the US. There is a definite increase in the flow of western-educated talent heading back to the East for better job prospects.

Personal Perspective

• Mandarin is my mother tongue but has slackened as I use English for work and in daily life. I’m brushing up on Mandarin by reading articles, with a keen interest on China’s ambition in digital Yuan and blockchain adoption. Several Chinese cities are now on my bucket list: Yunnan, Guizhou, Hebei, Henan, Sichuan, Hunan…a re-discovery and appreciation of my heritage and roots.
• Luxury fashion targeting China market now make collections suited for Asian sizes and tastes, great for range selection and fit.

Investment Perspective

• Affirming my belief in its growth and prominence, I’m allocating more into China equities. With exception of big names like Tencent, Alibaba, Baidu, Di Di Chuxing etc, Chinese stocks are not as well covered unlike its US counterparts. This is especially true for small and mid-size companies, where potential for super growth exists. Given this and my slackened Mandarin, I choose to invest via China funds and ETFs, diversifying across themes like Health Care, Technology, from small to big caps. Currently at less than 10% of my portfolio, my intent is to reach 40% with the remaining 60% split equally between US and Singapore stocks. I know of investors who have overweighted their investment portfolio in favour of China over US as they feel Chinese stocks are better valued with better growth potential.

Megatrend #3 – Technology the Incredible Enabler

Technology advancement is changing our lives at exponential speed, affecting the way we live, interact, work, play, bank, invest and how we age. Moore’s Law states that computing power doubles every 18 months and costs less.

Imagine Internet of Things (IoT) working seamlessly in our lives: Digital voice assistants making flight bookings based on specified criteria, automatic dinner reservations from appointments recorded in agenda’s, replenishment of groceries triggered from a smart fridge, alerts for health screenings from a wearable device tracking vital readings to never having to step into a bank. Already there are online-only digital banks and Apps allowing one to bank on-the-go such as Revolut, N26, Wise (formerly TransferWise), some even accepting crypto transactions (Wirex).

How about summoning a driverless car on demand much like a ride-hailing App? Although currently not affordable for mass market yet – a Lidar sensor costs more than €100,000 – but with Moore’s Law, it will be twice as powerful and 50% cheaper in 1.5 years. People will no longer own cars, eliminating ownership costs and more efficient usage via vehicle sharing, reducing CO2 footprint and releasing roads for more housing, industry and recreation.

Sight of drones making deliveries instead of delivery drivers will be the norm, much like a robot lawn mower or robot vacuum cleaner now. Robots are already in our midst – from factory floors to work places to our homes, working to make us more efficient, productive or even to help us reap financial gains. Having ventured into cryptocurrency trading late last year, I now have 4 Bots trading 24*7 to churn profits for me. Compared to trades I undertake myself, these Bots trade at higher speed, frequency and volume. Not bad being a master to Bots 🙂

Personal Perspective

Technology has indeed made my life easier and more convenient but also more complicated. A shift from scarcity to abundance mindset puts one in the best position to reap the benefits of technological advances and development.

My home in Holland is wired with Philips Hue system, Sonos wireless speakers, smart sensor heating and security systems – all managed and controlled via phone Apps. I can turn the heater off from anywhere in the world as long as there is internet connection. I bank mostly online from Florida, Holland, Singapore to Malaysia. 

Investment Perspective

I believe in new economy stocks and have allocated accordingly in the growth portion of my portfolio. I love FinTech and include crowdfunding, cryptocurrency (and the babelicious Bots) and robo-advisors in my portfolio. So many new and exciting possibilities!

Megatrend #4 – Demographics and the Detonation of The Silver Bomb

The world population is aging fast, exacerbated by falling birth rates. Society as a whole needs to adapt to this phenomenon with no time to loose. In Y2020, 4 working adults supported 1 senior, defined as those 65 years and above. By Y2050, merely 3 decades away, projection is 2 working adults supporting 4 aged – what a dramatic change in just 1 generation! This will impact ALL of us who are thinking of or planning for retirement.

People will live longer with better healthcare and centenarians are projected to grow 8 fold from just over half a million in Y2020 to 3.7million by Y2050! Those 65 years and older will have tremendous spending power given decades of paid work and smart investing. This silver economy will drive travel, medical, healthcare, FMCGs, investment and living arrangements.

Retirement age needs to be raised as public and private pension plans will not be able to meet their obligations with less contributions supporting more and longer pay-outs. It is crucial to take retirement planning into our own hands instead of relying on pension funds and savings. I advocate F.I.R.M over the F.I.R.E movement as financial knowledge is the best way to build and safeguard one’s retirement. The best time to start was yesterday; the next best is now.

Personal Perspective

I reviewed my insurance portfolio just before retirement to ensure adequate medical coverage. In all studies conducted, medical and healthcare spending escalate in later years. For those who work and depend on their employers for medical insurance, it is crucial to add personal coverage once you leave work as most group medical plans are not potable.

Maintain a healthy lifestyle with balanced diet, lots of exercise and an aptitude for learning to stay engaged in this interesting world. When I’m in Singapore, a city where public transport is considered relatively  cheap, I walk whenever I can. In Holland too, I take long walks which is pleasant due to dryer, cooler climate and amazing natural landscapes. The forests, parks, lakes and waterways provide breathtaking sights.

My retirement planning is until 108 years (prosperous number – can you tell that I’m Chinese?) with ongoing investment income to sustain a better-than-average retirement lifestyle.

Investment Perspective

• In anticipation of a long overdue market correction, I believe retirees make perfect tenants as they are least affected by economic conditions. In Holland, land-rich farmers and bourgeoisie are ditching energy-consuming and high-maintenance houses and estates in favour of apartments with modern features such as floor heating, lift and balconies for their retirement years. Since 2019, we only invest in single-storey apartments.

• 5% of my portfolio is allocated to ETFs of healthcare stocks catering to this silver economy. In Netherlands, there are REITs that build and manage retirement villages with integrated health care, nutrition, physiotherapy and personal grooming services with doctor-on-call and nurses on duty. 

Ready for the Megatrends?

We will be swept by these megatrends whether ready or not, like it or not. It is important to be aware and ride the waves instead of being overwhelmed. Keep learning new things – isn’t that the new buzzword: lifelong learning? – especially those that will affect our lives. Stay curious, embrace new technology and be a part of it all. Better still, take control…and keep breathing 🙂

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Life isn’t about waiting for the storm to pass; it’s about learning how to dance in the rain  ~ Vivian Greene

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Savvy Maverick